The Financial Markets Committee (FMC) convened last Monday (28 April 2025) to discuss recent developments in the domestic financial markets.

The global financial markets have experienced heightened volatility in recent weeks, particularly following the announcement on 2 April of wide-ranging tariffs by the US on its trading partners. These developments have led businesses and investors to adopt a more cautious stance, reflecting growing concerns over the direction of global trade policies. The Cboe Volatility Index (VIX) rose to a high of 52.3, while the S&P 500 and MSCI World Index recorded initial declines of 12.1% and 11.3% respectively. The US dollar also traded notably lower with an 8.3% year-to-date drop in the US Dollar Index (DXY). Market sentiment has since shown some signs of recovery, supported by the temporary pause of tariffs exceeding 10% for 90 days from 9 April. However, the outlook remains uncertain and subject to the outcome of ongoing trade negotiations.

The FMC noted that the domestic financial markets remain resilient and continue to intermediate effectively:

1. The ringgit has appreciated by 2.3% year-to-date against the dollar along with most regional currencies, driven primarily by broad dollar weakness.

2. The domestic stock market (FBM KLCI) recorded an initial decline of 8.2% following the tariff announcement, tracking the fall in global equities. However, losses reversed shortly after the tariff pause to close 1.1% lower on 25 April (relative to 2 April).

3. The domestic foreign exchange market liquidity remains high with an average daily turnover of USD18.8 billion year-to-date and a healthy year-on-year growth of 6.8%, allowing domestic corporates to meet their foreign exchange needs. Members also observed growing interest in using local currencies for the settlement of cross-border trade and investment transactions.

4. The domestic bond market continues to attract robust demand with an average government bond auction bid-to-cover (BTC) ratio of 3.01 year-to-date (2024: 2.56). Liquidity in the secondary market improved further with an average daily trading volume of RM7.3 billion in 2025 (2024: RM4.6 billion) and a high of RM15.5 billion. Members also noted that strong domestic demand for corporate bonds have narrowed yield spreads, providing a cost-effective avenue for corporate fundraising activities.

On market development, the FMC positively viewed the growth of the Islamic financial market in Malaysia, in particular the development of a deep and vibrant sukuk market. Notably, the Malaysian Government Investment Issue (MGII) market has grown in prominence over the years and is now comparable to the conventional Malaysian Government Securities (MGS) in terms of size and liquidity. MGII now accounts for 48% of government bonds outstanding and 47% of government bond trading volume in 2025. This expansion has been accompanied by heightened awareness and acceptance of sukuk as an asset class by the global investment community. Accordingly, MGII has been included in most major global bond indices, including the Bloomberg Global Aggregate Index and J.P. Morgan Government Bond Index – Emerging Markets.

The FMC welcomed continued efforts by Bank Negara Malaysia (BNM) to spearhead further advancements for MGII, with a focus on initiatives to enhance MGII’s accessibility, liquidity and visibility. These will include a review of the dynamic hedging framework to facilitate hedging by index trackers as well as supporting market-making by domestic financial institutions through improved repo availability.

FMC Chairman and BNM Deputy Governor Adnan Zaylani concluded, “The Malaysian financial markets have remained orderly despite the volatile external environment. This allows us to focus our efforts on market development initiatives that will further enhance investors’ experience in our markets. Nonetheless, we remain vigilant amid the rapidly evolving global situation.”

About The Financial Markets Committee (FMC)

The FMC is a committee established by BNM in May 2016 and comprises representatives from Bank Negara Malaysia, financial institutions, corporations, financial service providers and other institutions which have prominent role or participation in the financial markets.